VZCZCXYZ0000
OO RUEHWEB

DE RUEHUL #0749/01 0680511
ZNY CCCCC ZZH
O 090511Z MAR 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6454
INFO RUEHBJ/AMEMBASSY BEIJING 0215
RUEHMO/AMEMBASSY MOSCOW 7150
RUEHKO/AMEMBASSY TOKYO 0296
RUEHUM/AMEMBASSY ULAANBAATAR 1103
RHHMUNA/CDR USPACOM HONOLULU HI
RHMFISS/COMUSKOREA J2 SEOUL KOR
RHMFISS/COMUSKOREA J5 SEOUL KOR
RHMFISS/COMUSKOREA SCJS SEOUL KOR
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L SEOUL 000749 
 
SIPDIS 
 
SIPDIS 
 
NSC FOR CHA 
 
E.O. 12958: DECL: AFTER KOREAN REUNIFICATION 
TAGS: PREL ECON ETRD PHUM EAGR KS KN
SUBJECT: BRITISH DCM IN PYONGYANG ON CONDITIONS IN NORTH 
KOREA 
 
REF: 05 SEOUL 1264 
 
Classified By: POL M/C JOSEPH Y. YUN.  REASONS 1.4 (B, D). 
 
SUBJECT 
------- 
 
¶1.  (C) British DCM to Pyongyang Lindsay Skoll told poloffs 
on March 6 that the Kim Jong-il regime displayed no signs of 
instability, opining that through the effective use of the 
state security apparatus and continued economic assistance 
from China and the ROK, the regime's staying power might be 
nearly infinite.  China's economic influence in North Korea 
was subtle but pervasive, especially in its near-dominance of 
the DPRK's resource industries.  Skoll predicted the DPRK 
would return to the Six Party Talks, but noted that North 
Korean officials were infuriated at China's role in the 
financial actions taken against Banco Delta Asia (BDA). 
Noting a sharp rise in exchange rates since late 2005, Skoll 
reasoned that the BDA case had caused a serious shortage of 
hard currency.  Reports of the improved food situation in 
North Korea appeared largely cosmetic, and living conditions 
in non-urban parts of North Korea remained "medieval."  The 
government's policy of harvest multiple crops from the same 
plot of land had all but exhausted the soil capacity.  END 
SUMMARY. 
 
NO SIGN OF REGIME COLLAPSE 
-------------------------- 
 
¶2.  (U) On March 6, British DCM to the DPRK Lindsay Skoll met 
with poloffs to share her observations on North Korea's 
social, political, and economic conditions.  Skoll said there 
was no evidence that the DPRK was close to a collapse.  On 
the contrary, the regime's capacity for survival appeared 
almost infinite.  The state effectively restricted movement 
and information, thus crippling any effort to organize a 
coup.  The key to overthrowing the regime, asserted Skoll, 
was the ability to organize and control the military.  The 
state security apparatus virtually guaranteed that this was 
denied to anyone.  The members of the ruling elite were fully 
aware that their welfare was tied to Kim Jong-il and the 
regime and would not do anything to jeopardize the status 
quo.  The effective state security apparatus also instilled a 
pervasive sense of fear, even among relatively senior 
officials.  Skoll recalled Foreign Ministry officials who 
disappeared for about six months, presumably sent to 
reeducation camps.  She specifically cited one individual who 
returned as an empty shell, with no hint of his original 
personality.  Although information from the outside world -- 
especially from South Korea -- was spreading slowly, Skoll 
believed there would be no instability in North Korea until 
Kim Jong-il's death. 
. 
CHINA'S DISCREET, BUT PROFOUND ROLE IN PROPPING UP REGIME 
--------------------------------------------- ------------ 
 
¶3.  (C) Skoll pointed out that China and South Korea's 
interest in preventing regime collapse guaranteed continued 
economic assistance.  The PRC, in particular, had a profound 
impact on the regime's survival.  Although not readily 
visible, China's economic presence in the DPRK was pervasive. 
 For example, Chinese firms appeared to dominate the DPRK's 
resource industries, such as metals.  Skoll confirmed reports 
that Chinese businesses had expanded investment in North 
Korea, in part, to recapture money owed by the DPRK for 
previous projects.  This phenomenon of expanding unsuccessful 
investments was so common that it strongly implied a degree 
of control from Beijing.  Indeed, the magnitude of Chinese 
economic activity alone suggested that the investment was 
policy-driven.  (NOTE: Per reftel, former British Ambassador 
to Pyongyang David Slinn told us last year it was unclear 
whether Beijing could exert direct control over Chinese 
entrepreneurs.  END NOTE.)  Border trade was also on the 
rise, Skoll reported, adding that she had witnessed North 
Koreans dumping truckloads of ginseng in exchange for 
television sets and other goods in Dandong, China. 
. 
HARD CURRENCY SHORTAGE AND BANCO DELTA ASIA 
------------------------------------------- 
 
¶4.  (C) Skoll thought the DPRK would likely return to the Six 
Party Talks, although the financial actions against Banco 
Delta Asia (BDA) remained a big stumbling block.  She was 
certain that the freezing of the DPRK's assets was hurting 
the regime, as evinced by the shortage of hard currency, and 
that North Korean officials were infuriated by the situation, 
especially China's actions.  Skoll pointed out, however, that 
a dramatic rise in the exchange rate coinciding with 
financial actions taken against Banco Delta Asia in Macau was 
the most salient issue in current DPRK economics.  Hard 
currency was noticeably short in supply.  The current black 
market exchange rate was KPW 7,500 to the Euro, up from KPW 
4,000 in December, and KPW 3,000 in the fall.  (NOTE: David 
Slinn, the former British Ambassador to Pyongyang, told 
poloffs last year that the exchange rate had averaged between 
KPW 2,200-2,400 to the Euro.  END NOTE.) 
. 
REPORTED IMPROVEMENT IN FOOD SITUATION LARGELY COSMETIC 
--------------------------------------------- ---------- 
 
¶5.  (C) According to Skoll, market activity in Pyongyang did 
not appear particularly vibrant compared to previous years. 
The Tong-il Market, for example, did not stock a greater 
number of goods than in the past.  Rice was no longer 
available in the formal markets, but could still be found on 
the black market. 
 
¶6.  (C) Skoll, who will complete her two-year assignment in 
October, remarked that living conditions in North Korea were 
harsh, in spite of a bumper harvest in 2005.  The food 
situation was better toward the end of the year due to a 
combination of favorable weather conditions and mass 
mobilization of people for planting and harvesting rice 
throughout 2005.  Skoll said, however, that the ROKG's figure 
of a ten percent increase in rice production was overly 
optimistic.  The traditional lean months of April and May 
would be difficult regardless of the bumper crop.  For 
example, even Foreign Ministry officials had been visibly 
gaunt last Spring.  The good harvest and the widespread 
"feel-good" atmosphere during the August-October Arirang 
Festival -- during which Pyongyang residents' food rations 
nearly doubled -- provided the cosmetic appearance of 
improvements in the food situation.  This phenomenon was not 
sustainable however, as current average rations approached 
the 600-gram mark depending on people's work unit. 
. 
COPING WITH THE COLDEST WINTER IN A CENTURY 
------------------------------------------- 
 
¶7.  (C) Noting the harsh weather the Korean Peninsula 
experienced during December 2005 (reportedly the coldest 
December in 40 years) Skoll took it for granted that a 
significant number of people perished from the cold. 
Pyongyang residents, including the relatively affluent, coped 
by huddling together in their apartments for shared body 
heat.  Many performed physical labor outdoors to avoid the 
damp coldness of their dwelling units in old, concrete 
buildings.  Hard drinking was another coping mechanism. 
Skoll added that the power supply was better in February and 
the weather had also warmed somewhat. 
. 
LIMITED ABILITY TO DISTRIBUTE FOOD, VIRTUAL SOIL EXHAUSTION 
--------------------------------------------- -------------- 
 
¶8.  (C) Skoll stressed that living conditions in Pyongyang 
and other urban centers were incomparably better than 
provincial areas, where the situation was "medieval."  (She 
first described conditions outside Pyongyang as primitive, 
then corrected herself, quipping that "primitive" conveyed an 
inaccurately positive description of the situation.)  For 
example, the increased agricultural output in 2005 appeared 
to make little difference in the provinces due to their 
limited ability to use the bumper crop.  Machinery was old 
and dilapidated, and no fuel was available to operate the 
machines anyway.  Even if the crop were harvested 
successfully, storage was inadequate or unavailable.  Even if 
storage was found, transportation to populations centers was 
unsatisfactory or nonexistent.  The result was a huge waste 
of such food as was produced. 
 
¶9.  (C) Policies that exhausted the capacity of farms to 
 
produce crops were another serious problem, said Skoll.  In 
some places, the regime was attempting triple cropping, 
leaving the soil so nutritionally exhausted that no amount of 
fertilizer assistance from South Korea would make a 
difference.  Baked, scorched earth was common throughout the 
countryside.  Citing one telling example, Skoll recalled 
seeing workers harvesting still-unripe maize on August 10. 
When Skoll asked about the apparent folly of harvesting the 
crop before it was ready, local authorities cited orders to 
harvest on that day, saying they had a four-day window to 
harvest all the maize in that plot of land and plant a new, 
third crop.  The provinces also suffered from landslides 
during the summer monsoon season due to large-scale 
deforestation. 
VERSHBOW